The threat of major interference in the grocery market by the competition authorities was realised this week after an OFT inquiry exclusively highlighted by The Grocer (September 6, p4 and November 15, p4).
The OFT ruled the acquisition of a single Co-operative Group store in Slough should be referred to the Competition Commission, unless Tesco sold the store.
This was because there was a “significant prospect that this transaction would substantially
lessen competition in one-stop shopping in the vicinity”.
Local shoppers complained, according to the OFT, after Tesco bought the store in Slough, even though it already owned an Extra store just over half a mile away. Experts said the decision raised the prospect of an OFT investigation every time a one-stop shop was bought by a multiple if it owned another store in its catchment area.
Guy Lougher, food and drink competition partner at lawyers Wragge & Co, said the new hard line adopted by the OFT was the result of two recent changes.
Last year’s Competition Commission report into the takeover bids for Safeway had crystallised definitions of competition. And reforms introduced by the Enterprise Act 2002 appeared to give the OFT much less leeway when deciding whether an acquisition should be referred.
Lougher said that, as the Act was being interpreted currently, if the OFT was presented with credible evidence opposing an acquisition it had no option but to refer a case. “It is demoted to the role of a postbox in all but the simplest cases,” he said.
However, the OFT is currently involved in a case in the Appeal Court to get this interpretation of the Enterprise Act overturned and give it more discretion to decide the merits of a case.
The Slough case could also help objectors to Tesco’s takeover of the Adminstore c-store chain, said Lougher.
Most objectors have been pessimistic about the prospects of success in blocking the Adminstore deal because the OFT has insisted convenience stores are a separate market to one-stop shops.
But Lougher said: “There is a significantly greater prospect of success with the current interpretation. If the OFT cannot confidently reject the complaints, it will have little option but to refer it.”
At Slough, Tesco claimed it never had long-term plans to trade the stores concurrently.
Corporate affairs director Lucy Neville-Rolfe said Tesco was about to close the Extra store for a major refurbishment and would consider selling the former Co-op store when the work was completed.
She said that she believed the OFT would accept that in lieu of a reference.
John Wood